Consumer Debts Bought by Third-Party Collections Often Violate Federal Law
A new article published by a law school professor at the University of Connecticut notes that many of the consumer debts sold to third-party collections agencies contain illegal language that violates the Fair Debt Collection Practices Act.
Specifically, the article references the pro se language of the contract which disclaims any representations as to the debt’s validity, enforceability or collectability or the accuracy or completeness of any information provided by the seller to the buyer. The argument is that this is in direct violation of the FDCPA’s mandate against deceptive or misleading representations regarding debt collection.
Our Miami consumer rights lawyers know that just as in the case of foreclosures, banks and debt collectors often win big in cases where borrowers are sued for the simple fact that borrowers never bother to fight the allegations. Often, people assume these firms are too big to engage in battle. The reality is that there are often fatal flaws – such as this – in the case against the consumer, but the banks and debt collectors end up winning by default because there is no one to challenge them. That happens in about 97 percent of these cases.
The goal here is to arm you with some information to help you understand why you may have a case, even when on the outset it seems like an uphill endeavor.
Third-party purchases of consumer debt really only began to get popular back in the 1970s, and these transactions are well known to take place for pennies on the dollar – sometimes fractions of pennies. These companies then make their money by turning around and demanding full payment – plus interest – from consumers, many times years after the original debt was incurred.
The low cost of the initial purchase is reflective of the fact that there is a high risk the debt won’t be collectible. These debts can include everything from delinquent gym memberships to old medical bills to auto loan deficiencies. Hundreds of millions of dollars in debt is purchased every single year.
This in turn often results in a flood of litigation in district courts and small claims, where there are an overwhelming number of default judgments.
This of course is after these firms have abused consumer rights in trying to collect the debt. The Federal Trade Commission has called the current debt collection and debt-buying practices part of a “broken system.”
Part of the problem, from the very moment these debts are purchased, is the “quitclaim” language contained in the contract. This language disclaims all material representations regarding the underlying debt, which is “sold as is” and “with all faults” to the debt collection agency. When the original seller of those debts releases all responsibility as to the validity, accuracy and enforceability of those debts, they are essentially saying, “We can’t guarantee that the person legitimately owes this debt.”
And many times, they don’t, either because the debt is too old or it may have been discharged through a bankruptcy or some other means. Of course, that won’t stop the collection agency from trying to get its cut.
Even if you realize that you might still owe this debt, you should never allow debt collectors to win a default judgment against you. There are many potential avenues an attorney may identify for you to fight back.
If you’re battling illegal debt collection or foreclosure in Miami or the surrounding areas contact Jacobs Legal for a confidential appointment to discuss your rights. Call 305-358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday from 5 p.m. to 6 p.m. on “Mortgage Wars,” discussing foreclosure topics that matter to YOU.